Recently, I was listening to an old “Rock’n Roll” record by “Bill Haley and his Comets” that included the song “Whole Lotta Shakin’ Goin’ On.” It got me thinking about our industry (metaphorically). Taking a look at what’s happening in our industry, there really is a “whole lot of shaking” going on.

Since SEMI’s last publication at the end of February 2011, SEMI’s World Fab Database research team has made over 280 updates on more than 230 facilities (from volume to R&D fabs). This includes 20 new records, 11 of which are for LED dedicated facilities.

SEMI’s data show increasing capital expenditure for 2011 with more companies spending US$1 billion or more in 2011 compared to 2010 (13 to 14 in 2011 versus 12 in 2010).

SEMI’s World Fab Database is tracking fab projects for you. The World Fab Forecast lists 1,139 facilities, including 59 future facilities. For 2011, the database is tracking over 200 equipment projects and over 60 construction projects.

Consolidation and Fab Sales

Since the last publication of our Fab Database reports in February, the industry has experienced more consolidation. Renesas sold its 8-inch fab in Roseville to German-based Telefunken; TowerJazz offered to acquire the Micron fab in Japan for $140 million; and in April, Texas Instruments made an enormous $6.5 billion take-over bid for National Semiconductor, which may be effective by year’s end. In May 2011, Infineon acquired Qimonda’s 300 mm facilities in Dresden for 100.6 million Euro. Promos sold its 8-inch fab in Chongqing, surprisingly to a player not associated as a semiconductor company: AVIC Systems, a subsidiary of China's state-owned enterprise, Aviation Industry Corporation of China (AVIC).

Far-flung New Fab Projects

In Russia, news resurfaced about a 300 mm fab, this time with MRAM chips by a newly formed company Crocus Nano Electronics, created by Russnano and Crocus Technology. This $300 million funded project plans to be in operation within two years. Advanced Technology Investment Co. (ATIC) of Abu Dhabi, with Globalfoundries, is quite serious about its intrepid plans to invest $6-8 billion. This may also include investment for a complete new infrastructure and a technology center. The Singapore Polytechnic Institute recently agreed to train workers for the new facility, and construction is planned to start in 2012.

Also, semiconductor fabs in India are back in the news as reports surface about possible fab plans there. With help of our office in India, SEMI’s World Fab Forecast currently lists five active facilities including one LED facility in construction. We have followed developments in India closely in the past and will continue to do so.

These events reflect some of the data behind SEMI’s World Fab Database, which tracks spending, capacity and technology node projects for every fab per company.

Increasing Capex Plans

Since our last report end of February 2011, some companies increased capex plans: Intel’s capex is growing from about $9 billion to $10.2 billion and Infineon’s from 550 million Euro to 850 million Euro (about $1.2 billion). Rexchip also revised their 2011 capex, more than doubling to about $300 million from $130 million, as more is budget for the continued ramp of a second DRAM fab shell and upgrading to 30 nm-class node. According to SMIC’s ambitious five-year business plan, they are targeting to become a $5 billion foundry company. SMIC recently announced $1 billion investment in their 300mm fab in Wuhan, and most of this is expected to materialize next year.

Fab Equipment Spending (New and Used)

As the year 2010 rocked upwards with about 134% growth in equipment spending to reach $33.6 billion, spending this year slows though keeps on rolling with about 31% growth. With this, fab equipment spending will reach an all-time high of about $44 billion ($40.8 billion without Discretes). The spending pace is currently expected to decline -6% for 2012. Despite the 2012 decline, equipment spending will be an impressive $41 billion, the second highest level ever (See table 1). Included in the 2012 spending will be some equipment expenditures for 450mm pilot development.

An early indicator of future fab equipment spending is fab construction spending and the number of new volume fabs beginning construction. The construction phase for a new volume fab takes about a year until equipment move-in begins. After that it takes about 3-6 months until volume production can commence. The number of new volume fabs starting construction shows an alarming drop for 2011 and continues into 2012. The last time the industry saw a drop of new fab construction projects was during the last economic crisis. See Graph 1.

Graph 1

This year, SEMI’s data show that only 17 new volume fabs have a high probability (>60%) of beginning construction, including 13 LED fabs. Excluding LED fabs, SEMI predicts only four volume fabs to begin construction this year, and four in 2012. Over the last 15 years, the semiconductor industry has seen only one year with this low count of volume fabs starting construction and that was during the distressing 2009 downturn. In most other years, the number of new fabs starting construction was in the double-digits.

As a result, fab construction spending slows down this year and in 2012. See Table 2:

Table 2: Construction spending

Capacity Trends

The earthquake in Japan on March 11 may have some short-term effect on utilization rates and capacity output, but will not have a significant impact on installed capacity.

Recent Fab Capacity (without Discretes) growth seems to have leveled to just below 10% growth annually. This trend is unusual as SEMI’s historical data showed yearly growth in double-digits from 2003 to 2007. Slower growth, under 10%, is projected to continue into 2012. At this point, our data shows that the growth rate of capacity will remain under the 10% mark into 2014. This may be explained because most existing fabs ramped up to full capacity by about end of 2012 and by the low number of new fabs starting construction the years before. See graph 2.

Graph 2

In 2010, the growth rate in capacity of Foundry fabs surpassed Memory fabs, with 13% versus 7%. This trend is expected to continue in 2011 as Foundry capacity will increase by 13% while Memory capacity will increase by 8%. Growth of LED dedicated fab capacity remains in the double-digits with over 40% estimated in 2011 while a lower capacity growth forecasted in 2012.

Memory dominates the worldwide installed fab capacity with a 38% share of the capacity this year, followed by foundries with about a 29% share. This share trend is expected to continue into 2012.

SEMI’s fab database now shows a few potential candidates for 450 mm wafer size. Construction of the first 450 mm ready facilities began last year, and more will begin construction this year.

Summary

In summary, the Rock ’n Roll continues… 2010 rocked; 2011 is expected to keep rolling to reach a record year for fab equipment spending. In 2012, although negative growth is expected for equipment spending, the total spending amount will still reach the second highest level in the history of SEMI’s fab database. The count of new volume fabs starting construction is historically low, giving reason for concern when looking at industry capacity plans for 2012 and beyond.

Because it takes about a year and a half to start a new fab from scratch to volume ramp, will capacity be able to meet future demand? Double-digit growth rates for installed capacities, as seen between 2003 and 2007, seem to have faded into the past. Capacity growth has matured to below the 10% mark, perhaps because of industry consolidation (fewer players) or perhaps companies still feel the shock of the last downturn and are currently more cautious about new investments.

SEMI’s worldwide team keeps tracking any changes and keeps you up-to-date.

SEMI’s World Fab Forecast report uses a bottom-up approach methodology, providing high-level summaries and graphs; in-depth analyses of capital expenditures, capacities, technology and products by fab. Additionally, the database provides forecasts for the next 18 months by quarter. These tools are invaluable for understanding semiconductor manufacturing in 2011 and 2012 will look, and learning more about capex for construction projects, fab equipping, technology levels, and products.

SEMI’s Worldwide Semiconductor Equipment Market Subscription (WWSEMS) data tracks only new equipment for fabs and test and assembly and packaging houses. The SEMI World Fab Forecast and its related Fab Database reports track any equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size, including new equipment, used equipment, or in-house equipment.